Siauliu Bankas: Small is beautiful (stays BUY)
Siauliu Bankas’ share price has increased by 25% in the past six months, causing revaluation losses through the P&L on the convertible loan to the EBRD. The losses have “masked†the growth in recurrent operations profit, which was up 34% in 3Q17 to EUR 10.2m. The strong growth has prompted us to increase our net profit estimate for 2018E by 11% to EUR 37m. The bank remains, in our view, a perfect way to capture the Lithuanian economic development via its focus on SMEs. GDP growth of 3.7% and 3.2% in 2017E and 2018E, according to the Bloomberg consensus estimates, should drive crediting activity higher, and Siauliu Bankas is capturing an increasing part of this, gaining market share. The bank remains an acquisition target, given its shareholding structure (EBRD owns 18%, and related parties another 21%). Having incorporated our estimates changes, the bank trades at a 2018E P/B of 1.2x and a 2018E P/E of 7.3x, 46% and 19% discounts vs. its peers, which we do not see as justified. We maintain our BUY recommendation on the bank and increase our price target (PT) to EUR 0.71/share, implying 19% upside.Siauliu bankas AB is a Lithuania-based company engaged in the provision of commercial banking and financial services to private and corporate clients. It offers such services as provision of bank accounts, offering the debit and credit cards and safety deposit boxes, cash and non-cash money transfers, operations with securities, currency exchange, lending and investment services, Internet banking, financial brokerage and real estate development. It also issues monetary warranties, guarantees and other warranty liabilities, as well as performs operations with payable documents, such as checks and others. The Bank has several branches, numerous client service units and subsidiaries.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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